It is the only company with an “Outperform” rating on its publicly traded stock among the companies included in the Media coverage provided by MoffettNathanson.
Why is that the case? Senior Analyst Robert Fishman offers a simple explanation: “[B]ecause we know exactly what the company is and maybe more importantly, what it isn’t.”
Fishman is referring to FOX Corporation, and there is a reason MoffettNathanson feels increasingly comfortable with recommending “FOXA” as a buy.
With prices at $36.25 in mid-morning trading on Thursday (8/11), Fishman cites FOX’s live sports and news, “strong affiliate fees and advertising” and “very strong balance sheet and cash flows” as the biggest plusses for FOX.
But, perhaps the bigger takeaway from the analyst is this. “SVOD streaming losses, cannibalizing digital ad growth or long tail of cable networks to defend for next MVPD renewal – nope, not here!”
Importantly, Fishman says, FY 2023 has now officially begun where the company expects to achieve “record revenue and EBITDA.” This will be driven by the next round of affiliate fee step-ups, the Super Bowl, political advertising, fast-growing FAST Channel platform Tubi, World Cup coverage and “the biggest positive to the bottom line” — the dollar-gobbling Thursday Night Football disappearing, erasing losses.
With that, MoffettNathanson maintains its FY 2023 EBITDA of $3.3 billion for FOX, reflective of 12% growth.
“We forecast free cash flow in FY 2023 to reach $2.1 billion ($3.90 per share), representing a 12% FCF yield at these levels,” Fishman says. “For FY 2024 we forecast sustainable free cash flow of $1.9 billion or $3.70 per share. Of course, the ultimate payoff for investors would be if Fox’s management team and Board of Directors eventually re-evaluate Fox’s future as a standalone public company. Given our view that the market keeps ignoring the company’s growth prospects by failing to assign fair value to its assets, once the Flutter arbitration is settled, we would expect the focus of this decision to come back into play.”
The Flutter reference is in regard to a matter that began in April 2021, when Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group.
FOXA has a price target of $46 from MoffettNathanson.
